The Qualifying Recognised Overseas Pension Scheme (QROPS) list published by HM Revenue & Customs is not really a definitive list of offshore pensions at all.
It’s difficult to describe the list – in fact it’s really easier to say what it isn’t.
The list is not a definitive list of all QROPS – Some schemes, and no one but HMRC knows how many, can opt for the ‘no publicity’ box, which means they are not on the list.
However, HMRC will deign to confirm the scheme is listed if they receive written permission from the scheme trustees allowing the release of information.
The list is not a definitive list of pensions that meet QROPS criteria, because HMRC warns potential investors that no due diligence is carried out on the scheme by tax officers.
Instead, QROPS providers self-certify their schemes meet the rules. The problem with this is the scheme administrator’s interpretation of the rules does not always match that of HMRC, so schemes and jurisdictions can be suddenly delisted.
This procedure has caused some investors a great deal of financial pain as they switched money from their UK pensions to a QROPS on the list, only to find sometimes years later that HMRC delists the QROPS.
Delisting means UK pension firms cannot transfer funds into a QROPS. For investors, the consequences can be a penalty of at least 55% of the transfer value of pension funds into the QROPS plus a welter of other penalties and charges.
However, delisting is not necessarily permanent or an indication of wrongdoing by any QROPS provider.
So what is the point of the list?
Get out of jail free card
A judge in the High Court must have had the same thoughts when confronted by HMRC begging to withdraw a case against more than 100 angry Singapore QROPS investors who claimed HMRC was fining them thousands of pounds for transferring funds into a scheme on the list that was later delisted.
The judge demanded a policy statement from HMRC, which was duly delivered but remains, to date, confidential.
The only plus for having a list seems to be that it’s a get out of jail free card for UK pension firms.
QROPS rules say that if they transfer tax-relieved pension contributions to a QROPS that is not on the list, they face a fine – but if the QROPS is listed and later found not to qualify, they are covered and face no action.
It’s hard to understand why pension firms have this protection when retirement savers face a penalty for doing the same thing.